As a result of Brexit, from 1 January 2021, European Union (EU) businesses which are not VAT registered or established in the United Kingdom (UK) will need to submit value-added tax (VAT) refund claims in the same way as non-EU businesses to reclaim UK VAT incurred for business purposes in the UK (with the exception of VAT incurred on goods in Northern Ireland). The deadline for such claims for the period 1 January 2021 to 30 June 2021 is 31 December 2021. This is particularly significant for EU businesses as it is the first time a claim of this nature will have been submitted in the UK. As the deadline is fast approaching, affected businesses will need to collate the relevant information and documents required to submit the claim as soon as possible.

Non-EU businesses which are not VAT registered or established in the UK will also be subject to the 31 December deadline, but will likely be more familiar with the claim process as the process has not changed for these businesses. These businesses will be able to claim for the period 1 July 2020 to 30 June 2021 where the claim is submitted by 31 December 2021.

What has changed?

Pre-Brexit, subject to certain conditions, EU businesses which were not registered or established for VAT in the UK, wishing to reclaim UK VAT incurred for business purposes, would have been able to submit an EU VAT refund claim to recover VAT incurred in the UK for business purposes. The claim period related to the calendar year in which the expense was incurred. In 2021, following the UK’s departure from the EU, EU VAT refund claims in the UK were required to be submitted online by 31 March 2021 for claims relating to the period 1 January 2020 – 31 December 2020 (in pre-Brexit years, the deadline for EU VAT refund claims would have been nine months after the calendar year claim period).

Pre-Brexit, separate claims (commonly referred to as “Thirteenth Directive” claims) applied to businesses established outside the EU which were not registered or established for VAT in the UK. After the end of the Brexit transition period, i.e., from 11:00 p.m. UK time 31 December 2020, EU and non-EU businesses not registered or established in the UK follow the same rules. These claims are now referred to within Her Majesty’s Revenue & Custom’s guidance as “refunds of VAT for businesses established outside the UK.” This is with the exception of VAT incurred on goods in Northern Ireland by EU businesses which will still be claimable via the EU VAT refund regime as a result of the Northern Ireland Protocol, which allows Northern Ireland to continue to apply EU VAT rules for goods only.

The claim period for non-EU business VAT refund claims in the UK is different to the historic EU VAT refund claim option in the UK, with the non-EU business claims running from 1 July to 30 June with a deadline of the following 31 December to actually make the claim. So, for a non-EU business, if the claim related to the period of 1 July 2020 to 30 June 2021, the deadline for submission in the UK would be 31 December 2021. This claim period and deadline will continue to apply for non-EU businesses. However, due to the interaction of Brexit, EU businesses making claims for UK VAT will have used the EU VAT refund scheme for UK VAT incurred up until 31 December 2020. On that basis, EU businesses will only need to submit a claim for UK VAT incurred for the period 1 January 2021 to 30 June 2021 with a deadline for submission of 31 December 2021.

Next steps

With the fast approaching deadline, EU and non-EU businesses wishing to make claims in the UK may wish to review the position to check the nature of the claim and whether the VAT incurred is deductible as well as whether the relevant information and documents will be in place to make a claim by the submission deadline.

For businesses wishing to review claim deadlines in other countries, the EY Worldwide VAT, GST and Sales Tax Guide 2021 provides further information.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United Kingdom), London

• Andrew Bradford | abradford@uk.ey.com